MILLIONS of widows are being left penniless by pension schemes that die with their late husbands.

A former government adviser has warned that women, who typically live longer than their husbands, are being left with nothing by so-called single life annuities, which don’t pay out to a surviving partner.

Investment expert Dr Ros Altmann said husbands were not buying the right product.

Every year, more than 400,000 people cash in their pension pot with insurers who promise to pay them a monthly sum for the rest of their life.

But the majority will sign up to a single life annuity, which is only paid to them and stops paying out when they die. Many are attracted to them because they offer a higher rate than a joint life annuity.

Earlier this week, a Dispatches investigation by Channel 4 highlighted the case of Frank Adams, who was sold a single life annuity by Scottish Life.

When he died, his pension died with him, leaving his widow with no income. Fortunately, in this case the company have agreed to reinstate the income that Mrs Adams would have received had a joint life annuity been purchased in the first place.

But failing to buy the correct annuity is an issue that could cause problems for thousands of women up and down the country.

If the annuity you purchase with your pension fund is only based on your life, as in Frank’s case, then any payments will cease on your death.

If you want an income to continue to your spouse then you need to make that choice at the time you buy your annuity, as Alan Dick, vice-president of the Institute of Financial Planning, explained.

He said: “We think once we have put in force a savings plan to build up a pension pot for our retirement that the job is done.

“However, building the fund is only half the story. The most important decisions are made at the point of retirement and some of these decisions are not straightforward or obvious.

“Drawing your pension benefits is definitely one of the times when good financial advice can be worth its weight in gold.”

In recent years, there have been major developments in the annuity market and rates can now be calculated based on multiple factors including where you live and your state of health.

This is another reason for making sure that you weigh up your options before deciding which annuity is best for you.

Alan said: “This is important as, on average, people in the west of Scotland tend to die younger than those in certain other areas like the wealthy south-east of England.

“People with known medical conditions (sometimes called impaired lives) are unlikely to be able to claim their pension for as long. Therefore, they should be able to achieve a higher level of income for every pound in their pension pot. We have seen clients benefit from an enhancement of over a third through filling in a health form and being underwritten for these enhanced annuities.

“So for someone who may have been offered a yearly income of say £10,000 from their current pension company, they could potentially obtain an income of over £13,000 per year by shopping around.”

Somewhere in the literature you receive from your insurance company you will read three words – open market option.

They won’t be prominent because what they mean is that you can hawk your fund around the market and sell it to the company who offer you the biggest income.

And that’s something that too few of us do. And it’s a mistake that can be very costly.

Alan said: “The company that already holds the pension fund is often not the best to provide an income in retirement. People are living much longer than at any time in the past.

“In fact, if you retire at 65 there is a good chance you will live well into your late 80s or even 90s and one in four are likely to make it beyond age 100.

“Making a mistake with the retirement options could prove costly and be something you have to live with for a very long time.”

It is also important to consider the options you require from any annuity, as once you make the deal you can’t change it at a later date even if your circumstances change.

Alan said: “Will a fixed amount each year be enough or will you need that income to increase each year to keep pace with inflation?

“And do you require an income for your spouse or dependants after your death? If so, how much?

“They may have income or assets in their own right.

“It is often tempting to go for the highest income at outset but this isn’t always the best option in the long run.”